Speculative, risky: Irish Central Bank bars retail funds from investing in cryptos

The Irish Central Bank has made some glaring statements regarding cryptocurrency investments in a report published on Tuesday, that could potentially effect the way retail investors engage with the industry.

Cryptos barred for retail players

In its annual Securities Markets Risk Outlook Report, the bank stated that it was “highly unlikely” to allow retail players to invest in the crypto market.

This specifically pertains to Irish-regulated funds targeting non-professional investors, which include “Undertakings for Collective Investment in Transferable Securities,” or UCITS and alternative investment funds (AIFs). While the former invest in securities and are regulated by the European Union. They are aimed towards retail investors and account for about three-quarters of Irish-domiciled funds.

AIFs on the other hand include hedge funds, private equity, and real estate funds that don’t come under the UCITS directive.

Retail players ‘unable’ to assess risk

The stance has been made due to “the specific risks attached to crypto-assets” and the perceived inability of retail investors to undertake appropriate risk assessment without professional expertise, the report noted. It also added that their “highly risky and speculative” nature makes them more suitable for wholesale and professional investors.

The comment was prompted by the many queries the bank has received lately over whether UCITS and retail investor AIFs can invest in crypto-related assets, the report said.

The statement can be taken as an extension of the already skeptical approach the Irish Central Bank has toward cryptocurrencies. In May last month, a central bank exec had expressed “great concern” over the rising popularity of cryptocurrency assets, due to them being a “speculative, unregulated investment.” He had also warned that investors could risk losing their whole investment when dabbling with the industry.

These restrictions for retail aimed funds have come at a time when crypto-backed exchange-traded funds and products have become all the rage in Europe. This is due in part to regulatory openness in some parts of the continent, where digital bourses have facilitated the success of these ETPs. In fact, many of them were outpacing traditional investment products by a huge margin large year, even as a slew of products get introduced across the region at an accelerated speed.